Tight budget may force Pentagon to cut forces - U.S. general

RAMSTEIN AIR FORCE BASE, Germany (Reuters) - The Pentagon will have to cut the size of U.S. military forces for the second time in as many years if across-the-board spending reductions of $470 billion over 10 years take effect March 1, the top U.S. military officer said on Saturday.

General Martin Dempsey, chairman of the Joint Chiefs of Staff, said about a third of the cuts would have to come from forces, with the remaining two-thirds taken from spending on modernization, compensation and readiness.

He noted that the Army had begun to shrink last year toward 490,000 from a high of 570,000, a result of efforts to trim $487 billion over 10 years as required by the Budget Control Act of 2011.

The Budget Control Act also envisioned the additional across-the-board cuts under a process known as sequestration. If those cuts go into effect, "the Army will have to come down again," Dempsey said.

Speaking to reporters traveling with him to Afghanistan, Dempsey said two recent high-profile examples of belt-tightening were attempts by the Pentagon to adapt to the current challenging budget climate and had nothing to do with sequestration.

The Pentagon said last week it would seek a smaller-than-expected pay increase of 1 percent for military personnel in the 2014 fiscal year budget. Pay increases have generally been pegged to an employment cost index and had been expected to rise 1.7 percent.

"That action is being taken to help us absorb the $487 billion in the Budget Control Act. It has nothing to do with sequestration," Dempsey said.

A defense official said the lower pay increase would save the department about $470 million during the 2014 fiscal year. The savings would amount to $3 billion over five years because future increases would be based on the lower 2014 raise.

Dempsey said the decision this week to delay deployment of the USS Harry Truman aircraft carrier strike group to the Middle East was to adjust to funding for the 2013 fiscal year.

Congress has not appropriated funds for the Pentagon for 2013. Instead, it passed a continuing resolution that temporarily extends Pentagon funding until late March at 2012 levels.

"The continuing resolution under which we're operating has more money in the investment account and less money in operations and maintenance and we don't have transfer authority to move it," Dempsey said. "So our operations and maintenance is deteriorating because of the misalignment of funding in the continuing resolution."

Dempsey is due to testify on the impact of sequestration at a hearing next week before the Senate Armed Services Committee.

"What we've got to make clear to the Congress next week (is) that it's not just about sequestration. We're trying to absorb the $487 billion Budget Control Act, we're trying to absorb the challenges that were imposed on us by the continuing resolution and we're anticipating absorbing sequestration," Dempsey said. (Editing by Doina Chiacu)